MPL lays off 350 employees, attributes cost cutting to increase in GST burden

economictimes.indiatimes.com:

Mobile Premier League (MPL) will lay off 350 staffers with an aim to control its costs that are expected to rise as a result of the increase in burden from goods and services tax (GST). In an email sent to the company’s employees on August 8, MPL cofounder and chief executive Sai Srinivas wrote, “Last week, it was confirmed that a 28% GST will be levied on the full deposit value rather than on gross gaming revenue (GGR). The new rules will increase our tax burden by as much as 350-400%.

As a business, one can prepare for a 50% or even 100% increase, but adjusting to a sudden increase of this magnitude means we need to make some very tough decisions”. “As a digital company, our variable costs predominantly involve people, server and office infrastructure. Therefore, we must take steps to bring these expenses down in order to survive and to ensure that the business remains viable.

We have already initiated work on revisiting our server and office infrastructure costs,” he added. “However, despite this, we will still have to reduce our people related costs. Regrettably, we will have to let go of around 350 of you.” The GST council on July 11 had decided to impose a 28% tax on online gaming at full face value.

This came as a surprise to the gaming industry, which had been batting for tax to be levied on the GGR, or the platform fee, charged to users. Following the announcement, stakeholders of the online gaming industry, including companies and investors, had made multiple appeals to the government, urging for a relook into the new tax rules. While the new tax regime has not kicked in yet, the industry expects a manifold rise in tax costs as a result of the 28% GST on online gaming.